Re: October [censored] thread
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my brother wants me to put $200 per 1p swing in the northern rock share price with a stop loss at 128p (currently about 178p), so a $10k position.
ive warned him i dont think he should till he learns about everything, and that it is pure gambling. i told him my concerns when he was going to do it when the price was 300p, he would of lost $14k then. now he wants to do it again.
what should i do?
edit: i guess his finances are important. he has about $120k in savings which he will use as a deposit for a house in 1-2 years time, his salary is about $110k and will rise to $130k-$140k over the next 1-2 years.
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He shouldn't gamble with a house downpayment, it should be in a nonvolatile investment like a money market. He should decide how much he needs for the house and he can gamble with the rest. But he also needs to be able to understand how Northern Rock works, so he can explain why it may go bankrupt, and how it can avoid bankruptcy (and what the common shares would be worth in that scenario). If he doesn't understand both scenarios in a detailed fashion he shouldn't be trying to handicap the likelyhood of either scenario.
I know nothing of Northern Rock's specifics but I think there are still many speculative excesses to be wrung from the mortgage business. And from anecedotal evidence it sounds like the UK is in a bigger bubble than even the U.S. was.
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